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New UserChina to change coal tax to price basis this year: Tax chief
11 Mar 2014
China will push forward this year with a plan to change the assessment of its resource tax on coal to a price basis instead of by volume, the country's tax bureau chief said on Monday.
Reform of the resource tax has long been on the agenda and is aimed at encouraging more efficient use of coal, which has been blamed for the country's air pollution problems.
The new coal tax, when implemented, is set to increase costs for miners such as Shenhua Energy and China Coal , potentially denting their earnings.
Coal producers are already struggling with weak prices and demand, and they may be unable to pass on the additional costs to consumers in an oversupplied market.
Wang Jun, chairman of the State Taxation Administration, said on the sidelines of China's parliament that low rates of inflation would make it easier to include coal within the scope of China's resource tax reforms.
"The move will be good for resource and energy-saving and our fight with pollution," Wang said.
Steam coal miners in China, the world's top producer and importer of the fuel, are currently taxed at between 2 to 8 yuan per tonne based on production volumes.
Under a draft proposal submitted to the State Council, the new coal tariff will be set at between 2 to 10 per cent of sales value, according to local media reports.
At current prices, the new assessment basis could mean taxes of between 11 to 55 yuan a tonne, about five times more than present rates.
Steam coal prices in China have been steadily falling since January and have dropped about eight percent this year on tepid demand and growing competition from cheaper imports.
The most-active thermal coal contract stood at 494 yuan ($80.64) a tonne on the Zhengzhou Futures Exchange on Monday.
Sluggish demand has already sparked a local price war after top local producer Shenhua slashed monthly booking prices to invigorate sales and protect its market share. ($1 = 6.1260 Chinese Yuan)
Source: Reuters